If you’re a first-time buyer, then this is the guide for you. You probably have a million and one questions about the whole ‘buying a home’ process, and it’s straightforward to get lost with it all. Whether you’re just gathering an idea of what it entails or you’ve already got your deposit ready to go shopping this handy guide will be able to point you in the right direction and answer a few questions.
Everyone knows that it’s ideal to have a deposit before even thinking about looking at the house. It will depend on the cost of the house and what you’re able to afford. A person is generally classed as a first-time-buyer if they’re purchasing their only or primary residence and have never owned a freehold or have a leasehold interest in a residential property in the UK or abroad. Before even thinking about looking at properties, you need to save for a deposit, these can often be hefty and will take a lot of planning to achieve. Generally, you need to try to save at least 5% to 20% of the cost of the house you’re looking at. Saving more than 5% will give you a much more comprehensive range of cheaper mortgages to choose from.
When you’re thinking about your deposit, it’s the perfect time to sit down and start creating a budget savings plan. You should look at yours and your spouse’s income and outgoings so you can delve into how much is essential go out and how much you can afford to save. When saving for a deposit, it’s critical to note that you will need to save as large an amount as you can each month; otherwise, you will be saving for a very long time. It’s easier said than done as if you’re already renting it can be challenging to save. If you’re in this situation, it may be a good idea to move in with family and friends and see if you can live rent-free for a while.
Yes, thinking about the cost of your home is essential, but did you know that you have additional costs associated with the purchase of a property? Don’t worry if you didn’t not everyone is aware. Apart from your ongoing monthly mortgage payments, there are other costs when buying a home that you need to think about. These include:
- Survey Costs- It’s wise to have a survey carried out on any property you think about purchasing. It just covers you for any hidden problems such as structural. You don’t want to buy and later find out that a considerable amount of work needs to be carried out.
- Residential conveyancing solicitor– There will be fee’s involved with hiring a professional to complete the sale of the property for you.
- Removal costs- You may not have much to move as a first-time buyer, but there could be cost nonetheless.
- Insurances- As a homeowner, it’s responsible for having things such as buildings and contents insurance.
- Initial furnishing and decorating costs- You’ve probably already planned these down to a T but have you considered how much of a value they’re going to be?
- Mortgage arrangement and valuation fees.
- Stamp Duty (Land and Buildings Transaction Tax in Scotland, or Land Transaction Tax in Wales).
- First-time-buyers will pay no Stamp Duty on the first £300,000 for properties worth up to £500,000 – Perfect considering most first-time buyers aren’t buying anything near that value.
Can You Afford it?
As a first-time home buyer, the most important thing to consider is whether you can afford to take this step. It’s a huge commitment to take on, and it’s not something to take lightly. It’s wise to put together a budget before you start looking for a property and stick to it as much as you can. There are now a variety of strict checks when you apply for a mortgage, so having a deposit and high affordability will increase your chance of being accepted. Lenders will check you can afford the mortgage and also ‘stress test’ your ability to make your payments if any changes such as starting a family, retirement, one income was to reduce or interest rates were to rise. As part of the mortgage application process, you’ll need to show the lender a detailed account of any outgoings you have and prove your income with bank statements and payslips. It’s essential to make sure that your bank account is looking perfect.
There are numerous government-backed schemes for first-time buyers; however, you will need to be squeaky clean to be approved, and they will want to know that you can afford it. Here are some for you to consider:
- Affordable housing schemes – frequently run through the council.
- Help to Buy scheme – where they will offer incentives such as individual savings accounts for deposits or match deposit amounts.
- Shared ownership schemes – where you only purchase part of a property and rent the rest, until you can afford to but the other percentage. Sometimes you can buy as little as 25% to start with.
Getting a mortgage can depend on numerous aspects, so it’s a good idea to do some research and possibly talk to experts such as credit or mortgage brokers. You’ll need to provide evidence of your regular, secure income and provide information on your outgoings, including:
- Debts- how much you pay and how long for.
- Household bills – Current Utility costs, Water, TV subscriptions.
- Other costs, such as clothing, childcare, and travel
- Payslips on hand.
- Tax returns and business accounts if you’re self-employed.
In rare circumstances, you can get a guarantor mortgage, but it is a massive ask for anyone, and it will mean they go through all the rigorous research too. This means a parent, guardian, or close relative agrees to be responsible for paying the mortgage if you cant. They shouldn’t be entered into lightly as they’re legally binding arrangements.
Are there any other tips you can share for first-time buyers? Please share them in the comments section below.